Zarah ChoudharyNew data from Brightmine, the HR data and insights provider, revealed that pay rises for the three months to the end of December 2024 declined further to 3.3%.
This has been followed by a sluggish second half of 2024, as pay rises stalled in Q3 and dropped in November and December suggesting a trend of declining pay rises.
Preparing for the 2025 increased national insurance contributions and minimum wage rises
The UK Government’s raising of national insurance contributions and higher national minimum wage rates which are set to take effect from April 2025, are expected to add pressure to employers’ pay budgets, with many likely to adjust their 2025 pay awards even further to offset the financial impact.
With inflation levels remaining relatively stable, the combination of rising NICs and ongoing economic pressures is likely to result in a decrease in 2025 pay awards compared to the median increase of 4.5% recorded in 2024.
Sheila Attwood, senior content manager of data and HR insights at Brightmine, commented: “Businesses are feeling financial pressure as we kick off the beginning of the year and are looking for creative ways to minimise the impact on employee pay packets – whether that’s passing costs onto consumers or reducing the number of employee hours worked especially for entry-level, National Living Wage jobs, like in the case of Next Group.
“However, despite these precautions, there’s undoubtedly pressure on businesses, which is being reflected in the pay rises we’re expecting to see given this year.”
The Brightmine analysis this month is based on the details of 12 pay awards that came into effect for the three months to the end of December 2024, representing around 3,000 UK employees.
Of the settlements collected for this period, two were merit deals where pay awards are allocated based on the individual performance of employees.
Of the basic deals that have come into effect in the current reporting period, all sit between 1% and 5%, with no pay freezes being given in this period.
The majority (77.8%) of pay awards in the latest quarter were lower than the deal given to the same employee group in 2023.
This indicated that in the current sample, there is little variability based on award type.
Brightmine has analysed preliminary data on pay awards for January 2025, providing a clear view of emerging trends in employee compensation.
Insights from 29 settlements to date revealed a median basic pay award of 3.5% for January 2025.
Brightmine’s latest pay forecasts survey added further context, with the median among the predictions from 289 organisations at 3% for 2025. This aligned with the trends observed in the early January data.
These findings reflected a cautious approach to pay awards in 2025, shaped by the broader economic landscape and organisational strategies.
Attwood added: “These early insights into January 2025 pay awards reflect the broader impact of the UK’s current economic conditions and shifting government policies.
“As pay strategies evolve, these trends offer a fascinating lens through which to understand how businesses are balancing workforce priorities with external pressures.”
